Adopting Toyota philosophy saves healthcare business

Rick Spence, Financial Post11.01.2011

Vancouver-based Nurse Next Door, was started after both founders had trouble finding adequate in-home care for family members. But NND has survived and thrived because it embraced "lean" principles that ensure the company only puts effort into the activities its customers care about.

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John DeHart and Ken Sim know all about caring. Their home healthcare company, Vancouver-based Nurse Next Door, was started after both founders had trouble finding adequate in-home care for family members. But NND has survived and thrived because it embraced "lean" principles that ensure the company only puts effort into the activities its customers care about.

About five years after the company's 2001 startup, "the wheels were starting to come off the bus," co-chief executive Sim says. With 1,100 employees and consistent profits, the bus looked roadworthy. Behind the scenes, however, "we were a bunch of people running around, doing whatever they could to get results," he says. "Costs were out of control. Things were starting to slip through the cracks."

That's typical of many growth companies, but Nurse Next Door's commitment to patient care demanded zero tolerance for cracks. "If you're a manufacturer and you mess up, you could lose money or even go out of business," Sim says. "But we take care of people's lives. We knew we could seriously hurt someone if we mess up, so something had to change."

Fortunately, Sim and DeHart were keen students of growth. As active members of the Entrepreneurs' Organization and attendees at "gazelle" conferences run by EO founder Verne Harnish, they constantly sought new ideas to make their business more effective.

Sim especially fell in love with "lean." Developed originally as Toyota Motor Corp.'s production philosophy, "lean" eschews waste, and takes aim at any activity that doesn't produce value for the customer. The result is not just lower costs, but customer focus, more consistent operations, and continuous improvement. "Adopting lean has been a huge part of our success," Sim says. "We are here today because of it."

Visiting manufacturing plants that had gone lean, and working with a lean coach, Sim and DeHart started their crusade by "reviewing everything we do from the customer's perspective. Everything they value and are willing to pay for, we want to do more of. Everything they don't value, we try to do less of," Sim says.

Most organizations, he says, tend to create practices and processes that increase over time in complexity, but have less and less importance to the customers. NND identified these processes through a customer survey that asked two questions: On a scale of one to 10, how would you rate our services? And, what is your biggest reason for giving us this score?

Sim says the feedback helped NND recognize many of its practices were a waste of effort. "We used to think customers wanted our caregivers to show up in uniform," he cites as one example. The company provided home-care staff with a uniform allowance, paid for cleaning the uniforms, and was about to draft policies governing the wearing of uniforms, as well as an enforcement protocol. "Then we found out our customers didn't care," Sim says. A bigger concern proved to be that the company's invoices were too confusing - a 45-minute fix that improved its customersatisfaction score by 20%.

NND had more trouble with another lean initiative: reducing its head-office space. When Sim scrutinized the 50employee "heartquarters" he realized half the space was wasted with desks and offices no one was using. He himself may be in only once a week, when he's not in meetings or travelling, so why did he need a desk? By embracing "hotelling," the office is now down to 22 desks and a few meeting rooms. Staff work from home when they like using iPhones and laptops - where, Sim notes, they're usually more productive. When they come in to work, they sit where they like and plug into the Wi-Fi.

At first, the staff defended their turf. "We got tons of resistance, even from our senior people," Sim admits. He pushed back by communicating. "We showed people examples of how this has worked, we showed them blueprints, we showed them workflows." When the dust settled, productivity was up, and the company saved $100,000 a year in rent and maintenance.

Simplifying things can be complicated. NND spent a lot of time developing what it considers the industry's most effective caregiver-scheduling system. When NND recently adopted a new CRM system, Sim says it paid the software provider "a lot of money" to reduce the technology's functionality so it matched the simplicity of NND's lean systems.

With 2,400 employees now in its corporate and franchise locations, NND has only a few holes left to fill in Canada, and hopes to open 30 U.S. locations in the next year or two. "Lean" is now part of its culture, with everyone in head office making at least three customer-survey calls a month. "We know our customers," Sim says. "Our customers always want more and better, and that's how we win."

? Rick Spence is a writer, consultant and speaker specializing in entrepreneurship. His column appears weekly in the Financial Post. He can be reached at rick@rickspence.ca.

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